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Keywords:

  • product innovation;
  • horizontal collaboration;
  • autonomous governance;
  • discriminating alignment;
  • endogeneity;
  • aircraft industry

We examine the impact of governance mode and governance fit on performance in make-or-ally decisions. We argue that while horizontal collaboration and autonomous governance have direct and countervailing performance implications, the alignment of make-or-ally choices with the focal firm's resource endowment and the activity's resource requirements leads to better performance. Data on the aircraft industry show that relative to aircraft developed autonomously, collaborative aircraft exhibit greater sales but require longer time-to-market. However, governance fit increases unit sales and reduces time-to-market. We contribute to the alliance and economic organization literatures. Copyright © 2013 John Wiley & Sons, Ltd.